The Comptroller and Auditor General (CAG) in its latest report tabled in Parliament on Friday observed that the Indian Railways violated standard procedures and rules in selection of private players for the execution of PPP projects in Railways.
The report has found that faulty assessment was made on Internal Rate of Return (IRR), project approvals were marred by delays and though monthly progress reports were being prepared by special purpose vehicle (SPVs), there were there was lack of any monitoring mechanism for these projects. The audit body found that Railways did not formulate any model agreement for execution of the projects within the stipulated time frame, nor did it adopt the model prescribed by the Planning Commission for PPP projects in infrastructure sector.
Picking gaping holes in PPP projects, CAG observed that shareholders agreements with Pipavav Rail Corporation limited (PRCl) and Krishnapatnam Rail Corporation (KRCl) were incomplete as the same were executed before finalisation of the stakeholders and the modalities of recovery of subordinate debt were not specified in the shareholder agreement.
The audit body also noted that assessment of initial rate of return (IRR) was not realistic in all cases as was observed in case of PRCl and Viramgam Mahesana Private ltd (VMPl) where the projects suffered losses since commencement of operation. Modified approach adopted for implementing VMPl project resulted in additional financial burden of Rs 127.88 cr. It has found that mode of implementation of VMPl and Kutch Railway projects was modified without the approval of CCEA
Railways also failed to secure minimum traffic guarantee in respect of Kutch Railway Company limited though the project was conceived at the expressed interest of the stakeholders, it said. It said that traffic guarantee agreement was not executed in respect of VMPl, Hassan Mangalore Rail Development Corporation (HMRDC), Kutch Railways Company and Krishnapatnam Rail Corporation ltd (KRCl) despite the expressed interest of the stakeholders.
The CAG also criticised the lack of a model concession agreement (MCA), a framework of contract that sets the terms for incentives and targets for the private player.
